There’s some good news and not-so-good news today from Ziff Davis.
Ziff is the publisher of — among other things — PC Magazine, Yahoo Internet Life, and a bunch of gaming titles. I used to work there twice. I don’t anymore. A lot of friends still do. It was a financial pawn for a few years during the boom, and it again (or maybe still) in deep financial trouble. In plain English, it’s borrowed so much money — $250 million at 12 percent — and business is so bad that it doesn’t have the cash to both make its payments and run the business. (Just to put the 12 percent in perspective, you probably are carrying credit cards that have a lower interest rate, though your credit line is probably less than $250 million. If it isn’t, please call me ASAP to discuss some business dealings.)
The company made a fairly big deal yesterday out of saying that the holders of 60 percent of that $250 million in notes have agreed to a deal. Willis Stein, the investment bank that Ziff’s majority owner, is kicking in another $80 million in cash to Ziff. Of that, $30 million will go to bondholders. The bondholders are also being offered $95 million in what amounts to stock in the company. The theory, I guess, is that $95 million in equity is better than $250 million in debt that wouldn’t be paid if the company goes belly-up.
All this moving around of deck chairs will free up $30 million a year in money that otherwise would have been interest payments.
There are a few rubs. First, the deal requires that 95 percent of the bondholders agree. Sixty percent is nice, but not nearly enough. And second, the company’s banks have to agree to this scheme, and Ziff is already in default to them.
The stakes are high. In Ziff’s SEC filing yesterday, PriceWaterhouseCoopers said that the company may not be able to continue as a going concern unless the finances are straightened out. And even after that $250 million goes away, Ziff still owes another $175 million-plus.
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